Today we start the second half of the top ten reasons to leverage the complementary competencies of Compensation and Organization Development (OD) for greater organization effectiveness and employee empowerment. The top ten reasons come from Dr. Ed Lawler's book, Pay & Organization Development (Addison-Wesley, 1981) - the only book I know of that speaks to the natural synergy between the two disciplines that can better move an organization forward. Reason #6: Pay Systems & Institutionalization.Institutionalization is a big word and can speak to many things. In the context of this discussion, we are talking about institutionalizing - incorporating into the fabric of the organization - desired behaviors that support an organization's mission, vision, and strategy. Compensation is a powerful lever to institutionalize behavioral change. In fact, attempting large-scale change without assessing and potentially modifying compensation strategies can result in little to no sustainable impact and loss of precious time, dollars, and resources.

"...attempting large-scale change without assessing and potentially modifying compensation strategies can result in little to no sustainable impact and loss of precious time, dollars, and resources."

At their core, OD efforts are most often intended to bring about increased capacity for change to enable an organization to be more agile in meeting its business challenges. Given the intention to help organizations prepare for and embrace change, OD practitioners are well served to include their Compensation partners in most if not all of their efforts. Together they can craft joint interventions to better institutionalize the desired change in behaviors. This may be as small an effort as mutually ensuring performance objectives and associated rewards are aligned within a small 4-person Accounts Payable Department, or as large as resdesigning the performance & rewards strategies to fit a newly reorganized division of 5,000 employees worldwide.

Case in point: The CEO and COO of a global, multi-billion dollar organization decided their company wasn’t working the way they wanted it to. The Sales force was too busy selling their personal cash cows which were last year’s news; the CEO wanted to innovate and fill the pipeline with new product orders. The throughflow from Marketing to Engineering was murky at best, completely stalled if not confrontational at worst. Creative departments rolled up to Operations while pure cost centers were borne by departments responsible for generating revenue. The top executives wanted streamlined; they wanted agile. So the two of them reorganized the entire company– in less than a month.Cut to the chase: By and large, the reorganization took place in a MSWord document with SmartArt. Four boxes spelling out the four core competencies of the organization were big and colorful across the page. It looked great! Simple, clean, easy to understand. Yet when it was rolled out only a month after its inception, it wasn’t surprising to hear that nothing had really changed other than some departments changing cost center codes and some new supervisors put in place. Processes didn’t change and, more importantly, neither did behaviors because what had been institutionalized through culture, rewards, and time was not about to change overnight. While there were unfortunately a number of things missing from this scenario, from the need for greater study of the core challenges to much broader participation by the executive team and beyond, one of the core reasons behaviors didn’t change is because the performance objectives (that were also tied to rewards) were not modified to align with the new organization structure: rewards were still pointing to the past.While this was an example of (a very expensive) missed opportunity, I'd like to ask you to share an example of where behaviors were successfully institutionalized through performance & rewards. What made the difference? To what specifically do you attribute the greatest success?

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I am sorry to say that, after all my years in the field, I had to stretch to find a successful example. I could have provided a whole bunch of unsuccessful, but here's the one I came up with.

Large (15,000 empl) organization, doubled in size through acquisition, wanted to provide message to senior leadership that they needed to behave as a large corporation, rather than a franchise operation with total autonomy.

Two major changes, led by CEO. First, management incentive plan revamped to include significant "at risk" portion based on corporate performance. Along with that, major educational effort to help these leaders understand the nuances of a publicly traded company, as their experience had been in small "mom and pop" storefronts. Second, CEO started a quarterly performance review with leadership teams, and created balanced scorecard that was discussed each quarter, regarding the regional performance. This was powerful in that both learning and accountability took place during this meeting.

I think this fits your definition of holistic approach to change - looking at the rewards systems, but also engaging in dialogue. I watched the changes over six years, and they were pretty astonishing, in terms of behavior change (or not....) at the senior leadership level.

Carol, that's a great example. I agree with you: it's harder to come up with examples of success rather than those that were unsuccessful. Thanks for taking the time to share a great story of success! And as I noted in a separate conversation about the same topic, performance and rewards aren't the only ingredients in the recipe for successful behavior change, yet they can be powerful levers to institutionalize large-scale change. You've also brought up leadership and development, two additional key ingredients to succesful, institutionalized behavior change. Thank you for your comments.

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